Frequently asked questions

A registered defined-benefit pension plan sponsored by a corporation, usually for one person — a business owner, incorporated professional, or key executive. It funds the maximum lifetime pension the Income Tax Act allows, with deductible corporate dollars, and is set up and maintained by an actuary.

Someone with T4 salary from their corporation — dividends don't create pension room. As a rule of thumb: age 40 or older with T4 income of $100,000+, and the advantage is largest near or above the earnings that fund the maximum pension (about $190,000+). Below 40 the IPP and RRSP are nearly identical; the gap widens every year after. The honest answer is "run the numbers" — which our quote does in minutes.

RRSP room is fixed at 18% of earned income up to a cap. IPP funding is actuarial: it grows with age, commonly reaching 30–50% more annual room in the 50s and 60s. Past service recognition and retirement-time funding add further room an RRSP never gets.

Traditionally, several thousand dollars to set up and $1,000–$4,000 per year for administration, filings, and periodic actuarial valuations — all deductible to the corporation. Automation is exactly how Online Actuaries brings the traditional cost and turnaround down; your quote includes the fee schedule.

IPP participation generates a pension adjustment that reduces new RRSP room to $600 per year. Your existing RRSP assets are unaffected — although recognizing past service usually involves transferring most of them into the IPP as a qualifying transfer.

Yes — service with the company back to 1991 can usually be recognized. CRA requires a qualifying transfer of existing RRSP assets first; the corporation then funds the remainder as a deductible contribution once CRA certifies the past service pension adjustment. For long-service owners this is the single largest benefit.

Funding assumes a 7.5% annual return under the prescribed rules. If assets earn less, a deficit arises at valuation and the corporation may make additional tax-deductible top-up contributions — a feature an RRSP doesn't have. Strong returns can create surplus that pauses contributions instead.

It depends on the province. Plans covering only connected persons (10%+ owners) are outside provincial minimum-funding rules in several provinces, and Ontario allows an election to be fully exempt — giving real flexibility. Where pension-standards law applies, deficit funding can be mandatory. We set the plan up with the right provincial treatment from the start.

Broadly the same universe as an RRSP — cash, GICs, bonds, listed stocks, ETFs, funds — under pension rules: a 10% concentration limit per single holding (diversified funds exempt), a prudent-investor standard, and no shares of the sponsoring company.

Assets sit in a pension trust, legally separate from the corporation, and are generally protected from corporate and personal creditors — commonly stronger protection than an RRSP outside bankruptcy. One caveat: where a plan is exempt from provincial pension law (as many connected-person plans are), the case law is thinner, so treat absolute claims with care.

Yes, if they earn T4 income from the company. Multi-member family plans are the basis of succession planning with IPPs: when a member dies, assets can remain in the plan for surviving members rather than being deregistered and taxed. Adding the next generation makes most sense once pensions are being paid.

Before retirement, the value passes to your spouse (tax-deferred to their RRSP/RRIF) or, with no spouse, to beneficiaries as taxable income. After retirement, the plan's survivor pension applies — typically two-thirds to the spouse with a five-year guarantee. In a family plan, assets can stay in the plan for the other members.

Three routes: pay yourself a pension from the plan (which unlocks terminal funding — further deductible contributions for early retirement, a bridge to 65, and full indexing); buy a life annuity; or wind up and transfer to a locked-in vehicle. Pension payments must begin by the end of the year you turn 71, and from 72 a minimum amount must be paid each year.

Generally yes, it's locked in — you give up RRSP-style lump-sum withdrawals and Home Buyers' Plan access. This is the most consistently cited disadvantage of IPPs, and the degree of locking varies by province and exemption status.

The plan can move to a successor corporation. But if it's collapsed, only the Income Tax Act's maximum transfer value moves tax-deferred to a locked-in account — the excess is paid out as fully taxable income, which on a large plan can be a six-figure tax hit. This is the most under-disclosed IPP risk, and it belongs in your decision up front.

When you pay yourself mainly dividends; when you're under about 40; when income or plan size is too small for the fees to make sense; when corporate cash flow is unstable; when you value withdrawal flexibility; or when a near-term sale of the business would trigger the wind-up tax hit above. A quote costs nothing — the numbers will tell you.

Yes. Moving retained earnings into the IPP takes those assets — and their investment income — out of the corporation, which helps keep passive income under the $50,000 threshold that erodes the small business deduction.

IPP pension payments are eligible pension income: they qualify for pension income splitting at any age (RRIF income only qualifies from 65) and for the pension income tax credit.